Third-Party Web Ads Confer Jurisdiction over Nonresident

In a decision carrying significant jurisdictional implications for commercial websites, the U.S. Court of Appeals for the Ninth Circuit reversed a dismissal for lack of personal jurisdiction, ruling that an Ohio-based celebrity gossip site was subject to California jurisdiction based on its acceptance of third-party advertisements directed towards California residents. Mavrix Photo, Inc. v. Brand Techs., Inc., Case No. 09-56134 (9th Cir., Aug. 8., 2011) (Fletcher, J.).

Plaintiff Mavrix, a celebrity photo agency, sued Brand Technologies, owner of a popular website called celebrity-gossip.net. The suit, filed in the U.S. District Court for the Central District of California, alleged copyright infringement based on Brand’s unauthorized posting of copyrighted photos of celebrity couple Stacy Ferguson, lead singer of the Black Eyed Peas, and Josh Duhamel, an actor well-known for his role in the Transformer movies.

The defendant, an Ohio corporation with its principal place of business in Toledo, moved to dismiss for lack of personal jurisdiction. Brand Technologies argued that personal jurisdiction was lacking for several reasons. Brand has no offices, real property or staff in California. It is not licensed to do business in California. It has no registered agent for service of process in California, and it pays no taxes in California. Also, Brand’s website courts a national audience, not one restricted to California. Mavrix argued that nonetheless, the defendant was subject to personal jurisdiction in California because its website celebrity-gossip.net contained third-party advertisements that targeted California residents. The 9th Circuit agreed. Although the court held that the defendant’s contacts with California “fall well short” of the “continuous and systematic general business contacts” required for establishing general jurisdiction, the court ultimately concluded that the defendant’s actions in reposting the photos of Ferguson and Duhamel justified the exercise of specific jurisdiction.

The pivotal issue in the court’s analysis was whether Brand Technologies had purposefully directed its activities toward California. To that end, the court found “most salient” the defendant’s use of the copyrighted photos as part of its commercial exploitation of the California market. Brand Technologies’ business model relies on selling advertising space on its website to third parties. More traffic to celebrity-gossip.net results in more hits on the advertisements, which in turn results in more money paid by advertisers. Certain third parties buy advertising space on celebrity-gossip.net specifically to promote hotels, vacations and jobs in California. The defendant’s California user base is therefore evident, the court explained, from these California-focused advertisements. As such, the court determined that Brand’s reposting of the copyrighted photos to increase traffic to the site was integral to a business strategy of growing its California audience, thereby establishing the sufficient “minimum contacts” necessary for exercising specific jurisdiction.

Notably, on the same day, the same 9th Circuit panel ruled in CollegeSource Inc. v. AcademyOne Inc., Case No. 09-56528 (9th Cir., August 8, 2011) (Fletcher J.), that a nonresident defendant’s purchase of Google AdWords that included the term “California” supported a finding of purposeful direction toward California, thereby conferring personal jurisdiction. Again, the outcome hinged on the defendant’s actions in directing forum-specific traffic to its website for commercial gain. Practice Note: The 9th Circuit acknowledged the burden its ruling could impose on popular commercial websites. Website companies with a national viewership need to be aware that if they profit from the actions of users in a particular state, they may be subject to personal jurisdiction in that state.